Eric Young (’78) – Open Advice from a VC to Entrepreneurs

” I would rather work with a smart, capable entrepreneur with a mediocre idea than vice versa”

-Eric Young ’78

Co-founder of venture capital firm, Canaan Partners, Eric Young knows what to look for in a successful entrepreneur and a promising start-up idea. His company makes investments in high growth operating companies, typically in either the technology or healthcare industry. 80% of the companies that Canaan Partners invests in are in their seed or early series A stages. The Canaan Approach rests on the requirement that it needs to be a significant owner in its companies with a target of 20% ownership. The belief behind this method is that, since many companies go belly up, the ones that work need to work big. The success of investors is often determined by significant ownership. Furthermore, as a VC, Canaan Partners wants to provide entrepreneurs with more than just capital; the firm offers startups access to resources, coaching, encouragement (and criticism when necessary).

Picking the Winners

1. Great Entrepreneurs

Are smart, driven, and doggedly persistent.

Have a clear vision, and are effective at influencing others.

Are able to focus their efforts; have a realistic scope of their ideas.

Are willing to listen and be flexible; VCs are looking for leaders who are adaptable to their evolving companies.

Have the potential for a long-term relationship; the working relationship between a startup and a VC can be last from seven to ten years.

Know that it’s about the company winning, not themselves.

It is important for entrepreneurs to keep in mind that, as your company grows from its seed stage to maturity, there may be substitutions and turnover in regards to leadership. The survival rate of a great founder being able to adapt to a great leader of an enterprise is not high. Differences in needs and skill set often results in a change in management.

However, it is also possible for a great founder to learn the skills necessary to becoming a great CEO. Steve Jobs founded Apple but was forced out once the company had grown into an empire. Undeterred, Jobs worked hard to develop the knowledge needed to lead a large corporation, eventually returning and becoming CEO of Apple.

2. Great Ideas

Have a unique and valuable benefit proposition.

Can clearly identify their customers.

Have scalable market need.

Possess a sustainable competitive advantage.

Can be delivered via accessible supply chains.

Will ultimately have an attractive business model.

Have the potential to be strategically attractive to important companies (such as Apple and Google); providing established businesses with a desirable service will help facilitate access to liquidity.

For more information about Eric Young ’78, view his 2 video interviews on eClips